Class actions

For proof that Canada's class-action system is badly broken, consider the not-so-little case of last month's residential schools settlement.

While it secured the promise of billions in restitution for thousands of aboriginals who were displaced from their communities to attend the controversial government-run institutions, the ungainly litigation dragged on for a decade across six provinces and three territories, and resulted in an army of lawyers claiming $100-million in legal fees as part of the settlement.

"There's got to be a better way than lugging all those lawyers and all those briefcases to that many different courts," said Ward Branch, a partner with Vancouver-based litigation firm Branch MacMaster. "There were plaintiffs' lawyers in every jurisdiction. Everyone wanted their court to have a say, and that resulted in many duplicative efforts. It could have been avoided if we had had a national system in place from the outset."

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Mr. Branch and a growing chorus of peers in the litigation world say the case underscored a fundamental contradiction in Canada's class-action system. On one hand, class actions are designed to curb excessive litigation by letting a single representative plaintiff advance the claims of many. But in Canada, those actions come under provincial and territorial jurisdiction, meaning various overlapping claims can -- and often do -- proceed simultaneously across the country.

The result: Courts become cluttered with virtually identical cases, many plaintiffs face the quandary of having to choose which jurisdiction in which to cast their lot, and defendants are forced to fight duplicate battles on multiple fronts.

"We just sort of stumble along in multiple jurisdictions for months or years and that's what puts us in the box that the Indian residential schools case found itself in," Mr. Branch said.

The divvy-up-and-conquer scenario also stands in stark contrast to the nimble U.S. model, where a central body, the U.S. Federal Court, typically certifies just one representative action and assigns it to a district judge. In Canada, the Federal Court has no such power.

But now, in response to courtroom free-for-alls such as the residential schools case and a growing number of high-stakes securities and product liability cases, there are signs Mr. Branch's wish for a co-operative, national approach may be getting closer to reality.

Ironically, just as the residential schools case was lurching toward resolution, the Canadian Bar Association on Jan. 1 launched what some see as an important first step toward a more streamlined system -- an online database for sharing information about what class proceedings have been filed, so that duplicate cases are more likely to be nipped in the bud.

"The database can give you information to decide whether you should stop work on the file or whether you want to call and see if there's a need to co-operate," said Doug Lennox, a Toronto partner with B.C.-based Klein Lyons. "A lot of these cases are front-loaded in terms of the work that you do."

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Although participation was designed to be voluntary, judges, many of whom are advocates of a national class-action system, have rallied around the database initiative. In recent weeks, the senior justices of three judicial bodies -- the Supreme Court of British Columbia, the Toronto region of the Ontario Superior Court, and Quebec Superior Court's Montreal division -- issued so-called practice directions effectively mandating its use. "I'm astounded that things have proceeded the way they have so far, to get such harmony on a federal issue," said Rod Hayley, a partner with Vancouver-based Lawson Lundell LLP.

The database emerged from recommendations in a 2005 report on class actions by the Uniform Law Conference of Canada, an independent body dedicated to harmonizing provincial laws. Mr. Hayley, who chaired the committee that compiled the report, says now that judges appear to be on board, the next challenge will be to win over legislators. One of the report's other key recommendation calls for new laws that would require provincial and territorial judges to consider -- before certifying a class action -- whether a similar action in another region would serve as a better representative case.

Such a move would essentially mirror existing legislation that has so successfully expedited bankruptcy and insolvency cases, notes André Lespérance, senior counsel for Quebec with the Department of Justice. "Judges talk to each other and common sense prevails. It's the Canadian way."

Although no legislature has passed such a law for class actions, Mr. Lespérance, one of the government defence lawyers in the residential schools case, says he hopes voluntary co-operation between judges will prevail in the current courtroom pileup over Merck & Co. Inc.'s recalled painkiller Vioxx, currently involving more than 15 class actions across the country.

Still, lawyers who act in class actions say the strongest argument for a national system isn't in streamlining the big cases like Vioxx. A national system, they say, is crucial for helping ensure smaller but equally meritorious claims aren't orphaned by plaintiffs' lawyers, who mostly work on contingency and must bank on the promise of a large potential payout.

A $2-million cost award carved up into 10 slices for each provincial action "is worth on average only $200,000 in each jurisdiction," Mr. Branch notes. "So, each lawyer in each jurisdiction will say 'I can't afford to bring this case forward.' " The national approach is not without its detractors. One of its most prominent is Tony Merchant, a partner with Merchant Law Group, an assiduous class-action firm with 40 active files, and which played a leading role in the residential schools litigation.

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Mr. Merchant says consumer protection laws differ significantly from province to province, a reality that would be undermined by national class-action system.

He also challenged the claim that national actions would accelerate justice and cut costs. "Before you could start moving against the defendant, you'd have all of these preliminary skirmishes to try to decide who's going to lead, who's in charge," he said. "Deal making just increases expense."

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